The VP Global Markets walks into the office of the CIO. She impresses on the CIO that her profits are being squeezed and IT must do its part to reduce costs. She quotes a report from a reputable consulting firm that IT costs are not competitive. The CIO takes this as a call to action and embarks on outsourcing significant parts of the IT organization to cut costs. Three years later, the same executive, now promoted to President, approaches the CIO and laments that profits continue to be squeezed and IT is not moving fast enough to support new markets.

So what went wrong?

The CIO thought they were fully aligned with what the business asked of him. Although the CIO was able to achieve cost savings through outsourcing, it was at the expense of agility and flexibility that were required to meet the revenue growth required by the business to enhance profits.

Simply taking orders from the business without this understanding, the business and IT lose significant opportunity and can cause long term harm to the business. So much has been written and sermonized about the alignment of business IT that the true meaning has been lost. It is not about alignment – it is all about knowing your customer.

So what do you do? I suggest the following:

Meet with your customers. Consider meeting with the business’ customers (together with the business), if it would help better understand their perspective.

Listen to their objectives, needs and wants in their terms. Ask questions (avoid IT speak):

What does success and failure look like?

What and how much change is expected?

What is IT doing well and what needs to improve?

What is the business doing well and what needs to improve?

How is the business planning to grow revenue, profitability?

Is the business looking for agility and flexibility from IT to respond to changing business demands and conditions?

What IT capabilities help the business differentiate from its competition?

Where can the business taken on more or must reduce risk?

Confirm your understanding of their objectives, needs and wants. Put it in writing and confirm. Keep it simple.

Provide input to their objectives, needs and wants. Now this is where tremendous value can be realized by collaborating with your customer. IT should not just be an order taker to the business, but suggest opportunities where the business can benefit from IT’s experience and available technologies. This can include ability to deliver new services, expand to new markets, and reduce cost.

Prioritize needs and wants with their customers. Focus on needs only. And wants only when you’re done. I’ve seen too many projects expend most of the resources to customize and configure the 20% of functions that were treated as needs but were in fact wants.

Commit to what you can deliver. Know your capabilities and don’t over promise. Build confidence and track record with delivering significant changes in phases.

Deliver on commitments. This is key to building and maintaining the trust of your customers. There will be challenges; be transparent with the customer, involve them in making key decisions and trade-offs, and manage expectations. Engage the customer in delivery to ensure solution is adopted and benefits are realized.

Confirm that that customer objectives and needs are being met. If not, why not, and together take corrective action.

Repeat. This is a continuous process of improvement. The business environment continues to change and so should you.

Sounds simple — don’t get me wrong — it is not easy. It is a long-term relationship with conflicts, competing demands, and unwritten expectations. Keep at it. Engage the customer. Understand your customer. Work with your customer on defining their needs and prioritising your efforts. Then repeat.

Better, faster, cheaper is the new norm. Change is all around us. In this blog I discuss key business trends and opportunities for business, including:

Outsourcing

Cost of Energy

Economic Crisis

Economic Recovery

Technology Enabled Business Innovation

Outsourcing

Spurred by the recession – companies are continuing to look aggressively at delivering services more cost effectively. The vast abundance of telecommunications capacity and availability of the internet has made it easier to find suppliers around the world. It has also made possible that information and services work can be delivered almost from anywhere in the world.

The breadth of outsourcing offerings now covers most business and Information Technology (IT) functions, including finance, human resources, supply chain, and systems development. Developing countries, such as Vietnam, are investing in people, communications and IT infrastructure to become viable outsourcing destinations for western businesses.

The pressure will be on business and IT organizations to continue to become more agile, innovative, and cost-efficient. And if you don’t your competitors will.

Economic Crisis

The financial crises of 2007 and 2008 have rattled economies. This has resulted in significant government intervention in the world economy through regulation, bail-outs, economic stimulus – all paid for by record borrowing by governments. As this plays out in economies around the world, and as we’ve already seen in the UK and Greece, companies will need to plan for the eventual curtailment of government spending in order to balance their books. Business and IT will need to be prepared to find alternate sources of business, but at the same time governments will be open to solutions to help them reduce costs.

With greater regulation IT will face a higher burden of proof to regulators and external auditors of their compliance practices. This increasing burden of compliance and audit will create an opportunity for process improvement. I expect that businesses will seek ways to automate repetitive compliance activities.

During the recession, businesses and consumers significantly curtailed their spending and held on to cash in face of uncertainty and loss of jobs. They are waiting for signs of economic recovery and certainty about the future before they commit their scarce resources. This is creating significant pent up demand for goods and services. Once there are credible signs of an economic recovery, there will be significant pressure on businesses to respond by hiring, investing and fulfilling this pent-up demand.

IT needs to be ready to support this increased economic activity

During economic recoveries, new investments will fuel new business ventures and ideas that will deliver new innovation as well as competition. It will be imperative for businesses to evaluate and integrate innovations, or risk being left behind.

Managing Increasing Energy Costs

We are witnessing significant demands on energy to meet the needs of the emerging and developing countries. Although demand for energy has slowed down due to the global recession, I do expect that the price for oil, gas and electricity to continue to increase when economic growth returns.

Governments and utilities around the world are investing in smart grid and smart metering technologies to increase conservation, reduce the need for power generation, and provide more accurate and timely energy use information. Some of the leading jurisdictions, such as in Ontario, Canada, are requiring the installation of smart meters and implementation of time of use rates. Businesses and individuals should take advantage of these technologies and information to reduce and adjust their electricity consumption to lower their costs.

Other opportunities for reducing costs include consolidation, local-based manufacturing, to shared-services, implementation of virtualization and energy efficient technologies.

Technology Enabled Business Innovation

Today we have the confluence of inexpensive computing technologies, communications infrastructure, and relatively low access to capital. This confluence has resulted in reduced barriers to entry for businesses and individuals, contributing to and fuelling competition and economic growth. Not hindered by legacy investments new businesses and offerings will compete credibly head on with existing market leaders.

I recommend that businesses take a hard look at the following developments:

Cloud Computing – Enables you to leverage computing resources over the internet on demand. Security and privacy remain concerns that need to be addressed for your particular circumstance.

Software as a service – Delivers a fully managed application as a service, allowing you to focus on configuring and using the application, not on managing the application and underlying infrastructure. Security and privacy remain concerns that need to be addressed for your particular circumstance.

Wireless – Enables new applications and services to be delivered regardless of physical location and access to wires. Enables more timely and intimate connections with customers and employees.

Business services on demand – Whether it is a call center, invoicing, payroll, tax, business services are being designed and delivered as on-demand services. This enables a business to only pay for the service when they need it, as opposed to making significant investments in infrastructure, people, and processes in advance of demand. I believe this takes outsourcing to the next level and enables new ideas and concepts to be delivered to the market quickly and with minimal cost.

Process automation – Used to be the mainstay of large businesses with ERP systems. Now more affordable and quick to deploy through on-premise or software as a service offerings to small and medium size businesses.

IT as a microcosm of the business will be required to continually re-evaluate its service delivery model and processes to ensure that they are the most agile and cost effective to support the business. Although cost-efficiency and operational effectiveness will be important, I predict that there will be increased emphasis on agility, flexibility and speed of IT to anticipate and respond to business demands. We are now seeing this play out with increasing adoption of software-as-a-service offerings that enable rapid implementation and continuous enhancements.

I will explore approaches and strategies for thriving and surviving in these challenging times in future blogs.